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By Shaun Murison, Market Analyst

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Market overview

Local Data

Movements on our local bourse have been dominated by local company earnings releases and guidance, combined with risk aversion amidst geo-political unrest.

Tensions over a technical recession being realised, were abated after Gross Domestic Product (GDP) showed 0.6% growth quarter-on-quarter. The figure, although a relief from the previous quarter’s realised contraction, fell short of consensus estimates which forecast growth to have recovered to 0.9% quarter-on-quarter.

Producer Price Index (PPI) data showed inflation at a factory level to be at 8% annualised in July 2014, while the South African Reserve Bank’s leading indicator improved to a reading of 100.1 in June from 99.60 reported previously.

International Data

In Europe, the poor run of economic data from Germany continued, renewing concerns around the Eurozone’s economic health, and in turn recovery. Business and consumer climate data in Germany fell short of expectation and diminished from the previous months reading, while retail sales contracted by 1.4% month-on-month.

In the US, data has been upbeat with preliminary GDP showing strong economic growth of 4.2%. While new home sales have slowed from the previous month, pending home sales were a significant beat on consensus estimates (0.6%) showing a 3.3% increase month-on-month. Chicago PMI data, a leading indicator of economic health, alluded to industry expansion with an index reading of 64.3 which was well above expectation.

Ukrainian President Petro Poroshenko’s claims that Russian troops had entered the Ukraine as well as news that Pro-Russian rebels had increased their assertions have created a risk off scenario in emerging economies.

Top movers

A look at this week’s top blue chip movers, witness the obvious trend of a resource heavy weighting on the decliners list. Impala Platinum full-year results revealed the impact of five months of labour inactivity from the platinum strike, as Headline Earnings Per Share (HEPS) declined by a massive 74%.

Iron ore prices have reached five year lows this week, as Chinese inventories of the commodity have been reported at record highs, fuelling demand concerns. This has not boded well for local miners of the steelmaking ingredient such as Kumba Iron Ore and Assore who rely on Asian demand for the vast majority of exports. Diversified mining giant, BHP Billiton, is also heavily reliant on iron ore as it accounts for around 50% of underlying earnings. Losses on the share continue from the previous week’s disappointment of no share buyback being announced along with the company’s results.

On the top gainers list, Sanlam has benefited from a positive sentiment stemming from a massive HEPS increase of 119% from Santam (of which Sanlam owns around 60%). Earnings were boosted largely by less claims relating to inclement weather, the sustainability of which will be questioned moving forward.

Shoprite Holdings is experiencing a relief rally after last week’s negative reaction to its earnings release. A positive results release from Woolworths Holdings in which headline earnings increased by 17.1%, has perhaps provided a short-term improvement to sentiment in the retail sector. Woolworth’s success on the Witchery acquisition which provided a boost to full-year earnings growth, has perhaps added credence to their current David Jones acquisition, which was originally deemed expensive by many. Woolworths has now confirmed that it will undergo a rights issue to raise R10 billion in funding towards the David Jones acquisition.

International account

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 81% of retail investor accounts lose money when trading CFDs with this provider.You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage.